Audit scheme stinks

July 30th, 2012 in Opinion Free Press

There are very few government functions more important than auditing services. A good auditing system is independent. It hold politicians, bureaucrats and government contractors accountable for spending tax dollars well, and ensures the government is compliant with financial requirements. It serves as the first and last line of defense against waste, fraud and corruption.

The City of Chattanooga's auditing system is flawed.

Currently, the city's Division of Internal Audit is not independent. The director of internal audit, Stan Sewell, was hired - and can be fired - by the mayor. Of course, the mayor, the mayor's office, and appointees and cronies of the mayor are among the primary concerns of a city auditor.

Unfortunately, since Sewell reports to the mayor, he can't audit anything related to the mayor independently. As a result, large portions of government - and millions and millions of tax dollars - go without proper scrutiny.

Aware of the shortcomings of the current audit structure, the city council devised a different, more independent, system auditing system. The new plan features a five-person independent, unelected audit board of certified professional accountants appointed by accounting-related special interest groups who oversee the new position of city auditor and the revamped Division of Internal Audit. That new plan appears on city residents' Aug. 2 ballots as Ordinance No. 12556.

Shockingly, the auditing system on the ballot actually is worse than the city's outrageously awful current scheme.

Wondering how that's possible?

Well, for starters, the city council and the council's hand-selected audit commission that oversaw the creation of the new system allowed Sewell to write much of the ordinance that create the city's proposed audit structure.

The first thing Sewell did was write himself into the new "city auditor" position. According to the ordinance, "the current Director of Internal Audit on August 11, 2011 shall serve as City Auditor ..." Sewell then lined up a hefty pay increase for himself by throwing out his current salary and allowing the new audit committee (made up of fellow CPAs) to set the city auditor's salary based on "established market data."

Then Sewell and the council made it nearly impossible to fire the city auditor. Replacing the city auditor requires a vote of four of the five members of the audit committee. There are no terms, no term limits and no set regular revue or evaluation for the position. The 4/5th majority requirement means that even if Sewell is doing a bad job, he may well keep his gig. It would likely take a serious breach of conduct in order for four out of five fellow CPAs to kick Sewell to the curb.

To recap, the new independent city auditing system turns Mayor Littlefield's hire for audit director into an auditor for life, gives him a raise and makes him accountable, not to voters or taxpayers, but to a board of unelected fellow CPA's.

It's no wonder, then, that Sewell admits to funding campaign efforts in support of passing the audit ordinance. He refused to say whether he is the leader of the pro-audit campaign and would not specify other sources of funding for the efforts beyond his family.

It is interesting to note - and troubling to us - that the primary website supporting the efforts to pass the audit, www.informedcity.com, uses a proxy domain registering company that hides the name and other information of the individuals behind that website from public view. Why would the creators of the "informed city" website go to such trouble unless they had something to hide?

The "informed city" campaign efforts also maintain a Twitter handle, and Sewell is one of only six followers of the account. Sewell's own Twitter account features only two tweets - one of which is a link to an article that encourages voters to "vote in favor of [the] new city audit setup."

This isn't a referendum on Sewell. We believe that he's done an adequate job running the city's auditing division. This is, however, a referendum on making a flawed system even more defective.

If this terrible new audit structure is defeated, the city council should go back to the drawing board and create a new system that is both independent and accountable.